Relief for Airtel, Idea as tribunal stays Trai's predatory pricing order

Trai linked predatory pricing with SMPs, limiting the incumbents' flexibility in offering tariffs below Jio's, whereas there was no such limiting factor for the entrant

In a relief to incumbents, including Bharti Airtel and Idea Cellular, and a setback to newcomer Reliance Jio, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on Tuesday imposed an interim stay on the clauses of the Telecom Regulatory Authority of India’s (Trai’s) order relating to reporting requirements and the new definition for ascertaining “significant market power” (SMP). The tribunal did not, however, grant a stay on the whole regulation on predatory pricing. 

Airtel and Idea had approached the TDSAT challenging Trai’s regulation as they felt the new rules favoured Reliance Jio, which is a party in the case.

In February, Trai had come up with a formula to define predatory pricing and significant market power. This offered pricing flexibility to telecom companies with less than 30 per cent of the industry’s subscriber base or revenue. The regulator had at that point removed volume of traffic and network capacity as a condition to determine significant market power. It had also said predatory pricing would be determined on the basis of an operator’s average variable cost. 

Regarding reporting requirements, the incumbents had said the new rules would affect retention and acquisition of customers, as they needed to report all the offers to Trai. If an operator failed to comply, Trai could levy a fine of Rs 5,000 per day to a maximum of Rs 200,000. 

Incumbents were also unhappy with segmented offers being disallowed.

The TDSAT said it was apparent that the Telecommunications Interconnection Usage Charges Regulation, 2003, had been altered significantly with respect to predatory pricing and reporting requirement, and this would have a significant impact on all concessions and discounts to any customer.

“The clauses in the impugned order related to the reporting requirement and definition of SMP are stayed.... (Trai) will be entitled to ask for details of segmented discounts/concessions for analysis, but no penalty shall be imposed on that basis until further orders in these pending appeals,” the TDSAT said.

Trai has linked predatory pricing with SMPs, limiting the incumbents’ flexibility in offering tariffs below Jio’s, whereas there was no such limiting factor for the entrant.

According to the Trai order, a tariff can be considered predatory if an SMP offers services at a price below the average variable cost in a “relevant market”, with a view to reducing or eliminating competition. A penalty to the tune of Rs 5 million per circle would be imposed on any operator offering predatory tariffs. Operators were also required to report all tariffs to Trai within seven days. Even individual discounts and segmented offers needed to be reported.

As a result, every concession or discount would be treated as a fresh tariff plan. Since telecom operators were permitted only 25 tariff plans per month in a service area, it was bound to invite penalty, said the tribunal.

“This is not only impractical, it also affects their retention and acquisition of customers,” it added.

Challenging the Trai’s regulations, Airtel had said in its petition that the orders were “illegal, arbitrary and void and infringes the rights of the telecom players”. The petition had also said the order was designed to further the “sinister intent of one player which wants to drive competition out”.

The telecom operators also lamented the regulations had been framed on issues never raised during the consultation process and which were not part of the consultation paper.

Also, they claimed, the regulations were against the interest of consumers, as it infringed upon the freedom of the service providers to offer benefits.